What Types of Marketing Strategies Should Be Used in Order to Sell More Eco-Friendly Cars

What Types of Marketing Strategies Should be Used in Order to Sell More Eco-friendly Cars

Thesis

Jiří Hemelka

Submitted in Partial fulfillment

Of the Requirements for the degree of

Bachelor of Science

Business Administration

State University of New York

Empire State College

2015

Reader: David Starr-Glass

Table of Contents ABSTRACT ...... 5 ACKNOWLEDGMENTS ...... 6 I. INTRODUCTION ...... 7 II. HISTORY AND ESTIMATES ON SALES ...... 9 B. Eco-car Industry Present...... 11 1. Differentiations of eco-car industry ...... 11 a) Hybrid Electric Vehicle (HEV) ...... 11 i. In numbers/advantages and disadvantages ...... 12 b) Battery Electric Vehicle (BEV or EV) ...... 12 i. Advantages and disadvantages in numbers...... 13 c) Plug-in Electric Vehicle (PHEV) ...... 15 i. In numbers/advantages and disadvantages ...... 16 d) Hydrogen Fuel Cell Vehicle (FCEV) ...... 16 i. In Numbers/Advantages and Disadvantage ...... 17 2. Current events in car industry ...... 18 a) Volkswagen scandal ...... 19 b) Lower resale value and negative numbers ...... 20 i. Distrust ...... 22 ii. Presence of opportunity ...... 23 iii. Alternative ...... 23 III. CIRCUMSTANCE EFFECTING MARKETING STATEGIES ...... 24 A. Technical and financial aspects ...... 24 1. Comparison of ICEV vs. HEV ...... 24 a) Purchase price ...... 25 b) Range ...... 26 B. Market factors ...... 26 1. Governmental and economical aspects ...... 26 a) Policies ...... 27 b) Programs to increase eco-friendly market ...... 27 c) Crude oil vs. sales ...... 28 2. Personal Factors ...... 33 A. Environmental Factors ...... 33 a) Hypothetical model ...... 35 B. Potential Socio-Psychological Forces ...... 36 A. Basic concepts ...... 36 a) Individual drivers ...... 36 b) Planned Behavior ...... 39 I. STRUCTURE OF CAR INTUDSTRY ...... 42 A. Four Major pillars ...... 42 II. STEPS FOR BUILDING MARKETIGN STATEGIES ...... 44 A. Creating New Marketing Strategy for introduction of a new product ...... 44 1) Product planning process ...... 44 a) Market segmentation ...... 45 i. Demographic, geographic, psychographic, economical, socio-cultural and behavioral segmentation ...... 45 ii. Market targeting...... 47 b) Opportunities in the marketplace and possible marketing strategies ...... 48 i. How to find opportunities ...... 50 ii. Demand management ...... 50 iii. Marketing mix ...... 52 iv. Branding ...... 53 v. Buzz and word of mouth marketing ...... 55 c) What the customer needs and wants in the product ...... 56 i. Customer value...... 56 ii. Desires for eco-friendly car ...... 57 d) Defining what that product is ...... 59 i. Individual product decisions ...... 59 e) Additional “ecological” marketing approach ...... 61 B. Successes and failures in automotive and eco-car industries ...... 61 1. Why do new eco-friendly cars fail and what causes the success ...... 61 III. INITIAL INFORMATION FOR SHAPING THE POMOTING CHANNEL ...... 63 A. Advertising strategy ...... 63 1. International advertising...... 65 IV. CASE STUDIES ...... 65 A. Marketing success/failures ...... 65 1. Toyota failure ...... 66 2. Toyota/Lexus successful marketing campaign ...... 67 3. Opel Ampera ...... 71 4. Tesla and Lotus ...... 72 B. Challenges for shaping the marketing strategy ...... 73 1. Prioritizing the resources and its results ...... 73 V. SUGGESTION OF MARKETING STRATEGIES ...... 74 A. Marketing drives the price ...... 74 1. Skimming pricing ...... 74 2. Bundle pricing ...... 74 3. Value pricing ...... 75 4. Competition pricing ...... 75 5. Premium pricing ...... 75 6. Optional pricing ...... 76 7. Penetration pricing ...... 76 B. Channel and Message ...... 76 1. Customer education ...... 76 C. Power of emotions ...... 78 1. Buzz and word of mouth marketing ...... 78 D. Additional proposal ...... 79 VI. CONCLUSION ...... 81 WORKS CITED ...... 82 BIBLIOGRAPHY ...... 92 APPENDIX ...... 93

ABSTRACT

This marketing paper is addressed to marketing experts and people who are interested in the eco-friendly market. The main topic is to suggest marketing strategies which would work in the eco-friendly car market. The paper illustrates the brief history and description of current eco-friendly technologies. Next, the paper explains the current scandal on the internal combustion engine market along with its comparison with eco-friendly technologies. The research questions include external market factors, personal and psychological. The information flow then illustrates already used marketing strategies with the examples and at the end the researcher leaves a suggestion of possible marketing strategies. It was found that the main aspects to shape marketing strategies have to be created based upon the product and targeted market. The most important ones are price, the level of education and the feeling about the brand name of a product and its properties.

These foundations have to be used by three main marketing strategies: pricing strategy, channel and message and buzz with word on a mouth strategy.

ACKNOWLEDGMENTS

The completion of this paper required much information from various source in order to show acceptable reasoning and analysis. I would like to express my sincere gratitude to all who participated during the process of writing. Those people are David Starr-Glass MBA,

M.Sc., and M.Ed. who guided me throughout the whole paper work as my mentor.

I cannot forget about Professor Ciaran Kelly who advised me on the marketing and infrastructure specifically of automotive business and its operations towards customers.

Farther I also thank to Professor Humberto Aguilera, Ph.D. whose information and explanation helped to attain the understanding the topic from psychological perspective

Lastly, I am also thankful to Vojtech Stadnik (sales representative for Lexus Prague) for providing valuable information regarding customer’s decision process upon purchasing an eco-friendly car and the sales numbers which helped to show interest in engine alternatives.

I. INTRODUCTION

The aim of this work is to find out through which aspects to look at upon creating or advancing a marketing strategy for the eco-friendly car industry. The beginning of the eco- friendly auto industry was before the advent of engines used the most at the current period.

First findings are estimated to be before the 20th century by innovators such as Ferdinand

Porsche who invented the first hybrid vehicle. Since that time the eco-friendly market has been going up and down with its popularity, until the present period which offers not one but four different types of eco-friendly technological options: hybrid, plug-in hybrid, hydrogen and purely electric (detailed information is provided in the chapter titled “Eco-

Car Industry Present”).

Currently, eco-friendly cars are perceived as a car which is not for everyone because of its price, comparable CO2 emissions with internal combustion vehicles (ICEV) and persisting confusion about their functionality among people. However the current scandal called

“diesel gate” showed that ICEV running on diesel are much more dangerous for the environment and health which has been presented in all possible media channels. This is a negative marketing event for Volkswagen who will likely have to use various marketing strategies to rebrand and make people buy their eco-friendly products which they will implement.

Technological aspects vary with eco-friendly vehicles which has an influence on the final version of marketing strategies. These different properties have to be taken into consideration to convince customers to buy the eco-friendly product over the ICEV.

However, there are even more essential features which play a significant role before consumers make a final judgment on a purchase or potential purchase. The first are the government actions which support consumers with a certain level of financial advantage for eco-friendly car buyers. Another factor is the price of oil. It will be shown in this work that the appearance of positive correlation between eco-friendly cars and oil prices result in them playing a role in shaping the marketing strategy especially in respect to cost of ownership. The analysis of this paper also investigates the personal factors form behavioral and psychological perspective suggesting that price, education and customers of eco- friendly cars cogitate in different in comparison to buyers of ICEV.

To set up a possible marketing strategy this paper also analyzes the car industry environment and marketing strategies used in the past supported by real examples. It will established that the aspects driving the customer to buy the eco-car are mainly; excitement, connection to his/her personality, design and prestige which create the level of product being “cool”. From the manufacturer perspective the proper starting point to use any marketing strategy is to establish the target. Upon the summarization of all analyzed information the work suggests three marketing strategies as a tool to increase sales of eco- friendly cars. Those strategies are related to pricing, proper informative channel and buzz and word of mouth strategy to create a “halo” effect. The utilization of those strategies should not be exceeded otherwise the expected results may be overestimated.

The present eco-friendly market place is becoming popular and the future of the transportation. As a consequence the market is becoming strongly competitive for car manufacturers, importers and dealers mainly because of the external market activities, customer individualization and increasing competition within the eco-friendly market therefore, the implementation of proper marketing strategies have to be used in order consolidate position on the market place.

II. HISTORY AND ESTIMATES ON SALES

Eco-friendly cars started their journey in 1832 when Robert Anderson created the first vehicle driven by an electric motor which was almost 50 years ahead of the first patented internal combustion engine vehicle (ICEV) (Haig, 2004). The lack of practicality however extends popularity of this invention until the 1870s. The era of eco-friendly cars picked up again in 1900, when big players such as Edison or Ford invented the electric vehicle (model

T) and in 1901 Ferdinand Porsche invented first hybrid electric vehicle (HEV) combining internal combustion engine and electric motor (“The History of the Electric Car”, 2014).

Their popularity increased thanks to their quiet drive, standard level of practicality, absence of smell and noise related to internal combustion engine vehicles (ICEV) and since there was no need to shift gears, customers did not have exert significant amount of power to change a gear as with the ICEV.

Cars with steam engines were not such a strong competitor because of their inefficient operation during winter. During this time period they required a time consuming start. The cost of electric vehicle was $1000 (currently around $28 000) designed for upper class

where there were feature for upgrades up to $ 3000 (currently around $84 000). The percentage of sold eco-friendly cars out of whole car market climbed up to 38% out of the whole market with 33 842 vehicles in 1912. However, by the second half of 1920s the popularity of eco-friendly cars started to decrease. (CHAN, 2013).

The massive production of Henry Ford of ICEV in price $500 - $1000 compared to the average price of sold eco-cars for $1750. Another reason was the running cost; discovery of crude oil in Texas reduced the price of gasoline and thus made it more available for less fortunate people.The price to recharge the lead-acid batteries was 20 cents per kilowatt hour

(currently about $2.07) compared to 5 cents per gallon. This leads another disadvantage of former eco-friendly cars; their range. After almost 4 decades came the revival of eco- friendly cars in the 1970s mainly due to the oil crises in the Middle East (the correlation between these two variables will be discussed later in this work) (CHAN, 2013). Since then the invention of eco-friendly cars was not only for reason of energy problems but also because of environmental issues.

In 1990 government impact by policies and regulations reformed interest for eco-friendly vehicles. Currently, the technology is so advanced that eco-friendly cars can be used daily driving. The variety of eco-friendly cars increased along with new car manufacturers (Tesla

Motors) starting up. For example Toyota released the first mass produced hybrid in their line up in the 1990’s with success in world market (the successful approach will be described in section “marketing” later in this paper). Nissan brought its model called Leaf

to market also during this period (“The History of the Electric Car”, 2014). Almost every car manufacturer offers eco-friendly vehicles and its number has grown substantially.

B. Eco-car Industry Present

Car manufacturers have to face various objections out of which environmental issues seem to be the most significant. Eco-friendly cars are response towards tightening governmental policy.

1. Differentiations of eco-car industry

In order to represent the potential marketing strategy for eco-friendly cars, it is necessary to firstly introduce and specify brief information about different types of such vehicles and their main manufacturers on the market (featured manufacturers were picked because they have succeeded the most among their competitors in terms of sales and will be mentioned later on in this paper either because of their marketing success or comparison with other aspects influencing their sales). In order to better understand the differences among the eco- vehicles, the table representing more detailed information can be found in the appendix.

a) Hybrid Electric Vehicle (HEV)

HEV combines internal combustion engine along with electric motor power by batteries.

Compared to the BEV or PHEV, the car does not have to be charged. The hybrid system can recuperate the energy from using breaks and commuting. The most known

representative for this group is Toyota and its luxury brand Lexus, where both have put tremendous belief into this technology. Lexus bets on hybrid technology so strongly that does not offer diesel and competes with hybrid technology only.

i. In numbers/advantages and disadvantages

Comparison of HEV to ICEV provides advantages and disadvantages. When it comes to emissions which is one of the main keys such cars can significantly better off air quality since its emissions are much lower. Fuel consumption is considerably lower even compared to CNG or diesel engines. Research has shown that HEV can save up to 6,000 liters of fuel over their average lifetime. When it comes to running cost the HEV are more expensive than ICEV however analysis of the overall life cycle containing maintenance, fuel consumption, and cost of purchase is less than ICEV (Reddy &Tharun, 2013).

b) Battery Electric Vehicle (BEV or EV)

BEV were considered to be cars of the future, currently they are attacking the automotive market. There are nine models available in the U.S. market and almost every major car manufacturer has EV in its lineup. To measure their consumption is used a parameter called

“miles per gallon equivalent” (MPGe) used by federal agencies to compare consumption with ICEV. The power train of this vehicle uses electric power only received from either regular electrical outlet or so called superchargers (illustrated on image 1.0) which is a filling station for Tesla vehicles (car manufacturer making electric vehicles only) providing much shorter recharging time. Superchargers can refill half of the battery of Model S from

Tesla in 20 minutes. Strategically located supercharges can be seen on figure 1.0 below.

These stations are also well distributed in West and Middle Europe. Nevertheless for China and Australia is number of electric stations limited and therefore different power sources are needed. However BEV is becoming even more and more popular. (figure 1.2)

(Rockhold, J., 2014).

i. Advantages and disadvantages in numbers.

The two cheapest options in the United States market is the Smart ForTwo Electric Drive

(starting price about $25,000) and Mitsubishi i-MiEV (starting price $23,000).

Unfortunately this does not cover discount in form of governmental taxes form $2500 –

$7500 which varies according to the capacity of battery (Effects of Federal Tax Credits,

2012). In terms of efficiency of EV does better job upon using energy into their wheels. In comparison with the ICEV, EV can utilize up to 75% of energy for movement compared to

20% of ICEV; the residual 80% is generally lost during combustion process. This goes against argument that EV is powered by electricity from coal-burning power, advantageously it does emit zero emissions during the ride (Rockhold, J., 2014).

The approximate range of an EV is from 75-90 miles. Tesla models thanks to their robust battery package can manage 206-265 miles on full charge (the difference depends upon choosing either a battery with 60-kwh or 85-kwh) which is not really a significant difference. In terms of life period of battery package can be offered better numbers. The warranty for a battery is 10years/100,000 miles. If the battery functionality will be

damaged, the battery will be replaced without any charge. On the other hand the replacing cost can be expensive; Nissan has $5,499 price tag for new battery (not including installation charges and taxes) (Rockhold, J., 2014).

Image 1.0

Table 1.0

(Source: Tesla Store, Service Centers and Chargers, 2015)

c) Plug-in Electric Vehicle (PHEV)

Plug-in electric vehicles work on a similar basis as the HEV, thus combines electric motor with combustion engine. The system works the same as the HEV, internal combustion engines. The system comprises of only a combustion engine, electric motors, a battery or series of batteries. Electricity is designed to be the power while driving the vehicle. When

batteries can no longer provide enough of adequate power, the internal combustion engine is commanded to take over. The internal combustion engine can also complement the electric engine when power is needed during the drive. The only dissimilarity here is that

HEV does not have to be charged because it recuperates electric energy by breaking power while PHEV has to be charged.

i. In numbers/advantages and disadvantages

Based on the cars offered on the present market the average of range is roughly 26 miles with usage of only the electric motor. (Plug In America, 2015) It is smaller compared to the

EV because the rest of the space accommodates the internal combustion engine. In terms of costs the cheapest are Toyota Prius Plug (starting price around $30,000) and Ford C-MAX

Energy (starting price about $33,000) (Rockhold, J., 2014). The disadvantages of this power train are the maintenance costs as is with HEV. There is still the need to check oil level and check exhaust compared to EV. Nevertheless the main advantage comes during city driving where ICEV registers highest fuel consumption. Eco-friendly vehicles are able to utilize the electric power only and thus have minimum emissions and fuel consumption.

d) Hydrogen Fuel Cell Vehicle (FCEV)

The first flash of hydrogen technology was after the oil shocks in 1970 and later in 1990

(“Market Development”, 2012). However hydrogen technology has not been produced massively until the present century. The first one was Honda with its concept FCX Clarity which was supposed to be a massive production model. However because of production and financial issues was the car postponed indefinitely. The second product is about to be

in auto salons by end of this year. It is product of Toyota called Mirai (Toyotas luxury division Lexus announced at the end of October their concept using fuel cell as well). This technology runs completely on Hydrogen. The process of the system combines the chemical reaction of flowing air into the car with the loaded hydrogen supply creating electricity which functions as the power for the car.

The coordination of the process has five main steps which are as follows:

 Pump up hydrogen which is stored in carbon-fiber fuel tanks.

 The front openings absorb the flowing air and send it to fuel cell stack.

 Hydrogen travels from the tanks together with the air and create in chemical

reaction electricity within the electric motor to give car the power.

 Upon the pushing the gas pedal the electric power is sent from the fuel cell stack to

the engine.

 At the end no emissions are emitted out of the engine but only regular H2O.

Source: Toyota Mirai – The Turning Point. (2015), Reddy&Tharun, (2013)

i. In Numbers/Advantages and Disadvantage

According to Trevor J Davies(2015) “this technology could have a major role in the mid- long term future.” The main drawback of this technology for a buyer is the lack of filling stations. In table featured by the U.S. Department of Energy the number of hydrogen filling stations is 12 in all states within the United States (Alternative Fueling Station, 2015). EV’s

had a similar unavailability; however as can be seen in Figure 1.0 the number of electric charging stations is already sufficient. Some critics argue whether there is not a high level of danger upon an accident in HEV’s. A study found that during an accident where hydrogen leaks from the tank strongly depends on the power and direction of an air blow under the car which disperses the leaking hydrogen (Xie, Li & Christopher, 2015). The noteworthy advantage is the fact that a hydrogen vehicle has zero emissions and emits only normal H20. The real fuel consumption has not been shown yet because Toyota Mirai will be available in upcoming months.

2. Current events in car industry

Tighter business conditions from governments are pushing car manufacturers do anything in order to keep profits rising since it’s among their main goals mentioned in their annual reports. New generations have present refreshments or so called facelifts which are supposed to work as design enhancement and tiny technological adjustments (significant changes come with new generations). This process happens every 2-3 years depending upon a given car producer. Among the more significant technological adjustment falls engine improvements to increase range and efficiency at the same time. At the comparison of these two improvements are differences among eco-friendly cars and cars having only internal combustion engines as the source of driving power.

Internal combustion engines, especially diesel engines surpass eco-friendly cars in range but eco-friendly cars are more score better on efficiency. Diesel engines have become

widely popular among consumers mainly on European continent in last two decades thanks to their high range, low consumption and relatively sustainable maintenance. The second option is gas having much stronger representation in world market even though it has higher consumption. On the other hand the maintenance costs are lower compared to the diesel engine with better reliability. Outside Europe, the rest of the world markets for most sold car products are estimated gas engine for 2014 (European Vehicle Market Statistics).

Eco-friendly cars did not represent a significant threat since their low technological advances. Thanks to the success in Europe one of the German auto makers Volkswagen introduced diesel engine in the United States market. As was already said in previous paragraph diesel engines do not outperform eco-friendly cars in efficiency and therefore emissions emitted. Thus this was the main goal to decrease emissions since the issues regarding decreasing emissions and tighten rules. The decrease of emissions seemed to be successful and kept decreasing year after year. Nevertheless, recent scandal showed

Volkswagen has been lying about its true emission outcomes regarding diesel engines.

a) Volkswagen scandal

On the 18th of September in 2015 Volkswagen released a note stating it committed fraud by adulterating facts regarding emitted emissions by some of its models sold in the United

States market from 2009 to 2015 and was dubbed “Diesel gate”. The facts were found by a small organization interested in testing car engines. The message was announced by the

United States Environmental Protection Agency which admitted the installment of software under the controller in the car that regulates the emissions from the tail pipe. This software allows the car to turn on the emission suppression when the car is being tested in the

laboratory. But the system turns off afterwards when the car is out on the road. The scope scandal is broadening under claims from some experts, the Volkswagen presence is heavily threatened.

Although Volkswagen’s reaction towards the scandal was reasonably handled by admitting their action along with commitment to removing the controller on behalf of the customers, there is certain problem within the organizational structure of Volkswagen. Their actions absolutely stray from a functional organization by claiming former CEO did not know about such technical adjustments although he is well known for being interested in such fields.

b) Lower resale value and negative numbers

Initially the first allegation concerned at least 480 000 diesel cars were affected all made after 2009, Jetta, Beatle, Passat, Golf, and A3 all equipped by four cylinder diesel engines.

That is likely to change to other models and widening to 11 million cars by the 22th of

September 2015 all around the World. By this date the company set aside almost $7.23 billion provision which will undoubtedly force the company to forego its earnings. So far the fines have been established for $18 billion as the biggest fine in history for manipulating emission tests (“Five Things on the Volkswagen Emissions Scandal”, 2015).

The negative consequences were followed by apologies and eventual resignation of present former CEO Martin Winterkorn. Scandal spread out from the United States market into other markets, especially to European market where Volkswagen is top selling auto maker.

By the 25th of September Dobrindt, Minister of transportation in Germany announced 2.8 million of affected diesel cars in Germany alone (“Volkswagen picks”, 2015). The new

CEO of Volkswagen said customers will need to have their diesel cars serviced which is according to some experts’ a cost of more than $6.5 million (“Volkswagen to refit cars”,

2015).

The Volkswagen shares plunged as much as 20% on Monday in the week of allegations.

Then it fell another 23% on Tuesday, the 22nd of September (Five Things on the

Volkswagen Emissions Scandal, 2015).The value of Volkswagen Group (figure 1.1) has decreased significantly by more than 37 percent at the overall period from its value on

September 17th.

Figure 1.1

(Source: Bloombeg.com)

According to the annual report of Volkswagen for 2014 only passenger vehicle sales revenue was 99.8 billion Euros. Compared to what they have to pay it is not so significant number (Volkswagen Annual Report, 2014). Corporations dispose of such an influential power that they can use their enormous capital as a remedy to cover any policy violation.

Nevertheless suspicion was uncovered in Volkswagen and to recover in customers eyes not only money but also time will be necessary to recover.

i. Distrust

According to the definition by Berry (1983) of marketing, one the key purposes is to build relationships with customers and more importantly to make loyal customers out of them. In other words a level of trust is necessary to grow and have potential into the future. The trust of customers in Volkswagen products significantly declined and will be hard to regain.

They will have to invest a tremendous amount of financial resources. This money could have been used for various areas such as direct environmental development purposes.

Marketing plays necessary role to appear in a good light toward customers. Volkswagen is the second largest car manufacturer in the world in sales estimates the group sold

10,217,003 units (Volkswagen Annual Report, 2014). Manufacturers which have already started to work on the transformation into modern transportation will probably exploit

Volkswagen scandal for their benefit.

ii. Presence of opportunity

In 2004 Mr. Schindler claimed in his presentation at a Colorado conference on the topic of diesel engines that diesel cars possess four main reasons why people choose such an engine option: efficiency, environmentally pleasant, provide better running cost in terms of consumption and having future potential. However, diesel gate debates have shown that some of these points are not fully true. This brings opportunity for manufacturers of eco- friendly vehicles wishing to carry out a takeover of some customers and thus increasing their revenue. As was mentioned in the section “recurring costs” by decreasing the price of electric engines manufactures can decrease the price of the whole car since the engine is one of the most expensive parts as a single unit. Governments are creating habitable environments for these products and make them more available for buyers. This situation is currently mostly presented in developed economies. An example is the European Union where government institutions put sanctions and policies to force car manufacturers and people to make the eco-friendly cars appear more on the road. Eco-friendly products seem to have significantly more positive market environments at the current period with support of major governments in the world which have shown to be a powerful force. These actions have been heading to one main purpose, to protect public health, environment and people’s lives.

iii. Alternative

During the scandal moment the offer (within the U.S. market) and future development

(worldwide) shifted from diesels to eco-friendly cars because those cars are efficient not only in terms of fuel efficiency but also CO2 emissions. For example, according to many

media sources and reviews, the new announcement of the VW Passat does not have a diesel

engine option and future development of their flagship called Phaeton will be offered as

PHEV option. Therefore, VW is clearly changing its offerings.

III. CIRCUMSTANCE EFFECTING MARKETING STATEGIES

There are contextual forces (public expectations, government policies, monetary factors,

and various environmental and socio-psychological categories) having impact on the

private sphere of customers ecological behavior (Nayum, Klöckner&Mehmetoglu, 2014).

A. Technical and financial aspects

This chapter will represent the differences between ICEV and eco-friendly engine alternatives.

1. Comparison of ICEV vs. HEV

Creating an effective marketing strategy is also necessary to be aware the dissimilarities

between eco-friendly vehicles and ICEV’s. In the case of global warming carbon dioxide is

the main culprit. According to the United States Environmental Protection Agency

transport pollution represents around 13% of world air pollution (Global Greenhouse Gas,

2015). Vehicles have 3 main metrics when it comes to defining the fuel consumption.

Vehicles are measured in city/highway/combined Miles Per Gallon (MPG). Out of these

measurements every ICEV has the highest fuel consumption in the “city” environment. For

example the American markets most sold vehicle, the Ford F-150 gets 16mpg in city on

average which is a significantly high number (Search by Model, 2015). Upon the comparison with the Japanese market where the most sold car was the Toyota Aqua (in other markets called the Toyota Prius C) retrieving 50 mpg city for its owners. (Fuel

Economy Guide, 2013). This is obviously a remarkable result. The Toyota is an HEV and its advantage appears during the city driving as was mentioned in unit “differentiations of the eco industry”. In terms of CO2 emissions the Ford emits 255g/km compared to the

Toyota emitting 61g/km (European Vehicle Market Statistics, 2014). In case of diesel engines International Council on Clean Transportation (ICCT) claims their emissions are roughly seven times higher than is allowed by the EURO 6 (Real-world exhaust emissions,

2014).

a) Purchase price

The current market of eco-friendly cars still struggles because of higher prices. Even though their initial price has dropped thanks to the technological advancement since the beginning of 20th century, there is still a higher purchasing price compared to the ICEV. As we look to an example Toyota, the strongest seller of hybrids on world market, where sales in the Toyota lineup has the least expensive hybrid cars with a starting price of$20 000 dollars. In a comparison of two identical models where one is the ICEV version with a starting price at almost $33 000 dollars and with an HEV version the price starts at almost

$37 000 dollars (New Cars, Trucks, SUVs & Hybrids, 2015).

b) Range

The disadvantage of eco-friendly cars is that they have low range by running only on electric power, significantly lower than ICEV’s. However, according to Rockhold (2014) the mile range of 75 to 90 miles is enough for most of the drivers. Studies show that the average American drives around 40 miles a day, thus HEV’s are sufficient for town driving which is currently the main task of eco-friendly cars (“DriveClean”, 2015). In comparison to the FCEV and the regular ICEV in terms of their power source the FCEV seems to be environmentally friendlier as well; to travel 248 miles 24kg of petrol would be needed but to travel the same distance using hydrogen only 8kg is needed (Campisi, Bartosik, Poppa

& Rivera, n.d.).Another current disadvantage of HEV is that high temperatures can decrease the range by 25-50%. Also in the winter time, the reaction of the electric engine takes more time which leads to higher fuel consumption. Common charging necessities may become a disadvantage if a car will not be used for some time (Reddy &Tharun,

2013).Information received out of this section suggests that price and range might be featured when implementing the marketing strategy.

B. Market factors

1. Governmental and economical aspects

In this unit will be investigated possible features which might have control over sales of eco-friendly cars and their relationship with those features as well.

a) Policies

When it comes to government actions according to research conducted, by Department of

Civil, Structural and Environmental Engineering and Trinity College Dublin claim that a change in taxation changed the perception and leaded to a 30% increase in sales of vehicles particularly HEV’s with lower emissions (Sustainable Energy Ireland, 2009). According to the National Academy of Sciences government plays an important role in the adoption of eco-friendly cars especially by supporting charging infrastructure and taxation or regulatory powers (Overcoming Barriers, 2015). Moreover the OECD claims that policy makers are a significant power in introducing green technology in transportation as a way to improve air quality as well as mitigate the congestion (Market Development for Green Cars, 2012). It was also found in links between behavioral and environmental science that impact of political incentives and policies in combination with information and moral appeals is much more effective (Gardner & Stern, 1996).

b) Programs to increase eco-friendly market

Presently there are many governmental programs which should ensure better air quality and decrease of emissions through investment programs. In the United States has program called “The New Energy of America”. It is a plan of Barack Obama’s to deal with appearing energy problems by the investment of $150 billion through the next ten years.

The outcomes should heavily influence the situation of oil corporations, customer purchasing power, support renewable energy sources, and increase the number of eco- friendly cars on the road. According to the plan over 1 million plug-in hybrids and hybrids should be on the road with a consumption of 150 miles per gallon or having at least 10%

electricity from renewable energy (“BARACK OBAMA”, n.d.).The U.S. government also provides federal tax credits which offers up to $7,500 dollars for those who purchase hybrid vehicles. However, according to calculations plug-in hybrid car owners would need to receive up to $12,000 in order to pay off their investment. (“Effects of Federal Tax

Credits”, 2012).

The European continent is governed by policy makers at the European institutions. They have been limiting car emissions through their policy EURO which changes over a certain period toward stricter emission levels.

c) Crude oil vs. sales

Oil supply and demand drives the economic flow which makes it a major player at the market, thus oil could be significant driver for sales of hybrid cars. Logically can be assumed that by higher price of oil higher sales of eco-friendly vehicles will occur and thus create positive correlation. Based on this information a marketing strategy can be shaped.

To verify this connection, comparisons of graphs between sales of eco-friendly cars and oil prices will be presented. In the first chart 1.0, the flow of oil price in last ten years is presented. In 2007 it shows significant increases in value of oil and by the middle of 2008 a tremendous fall by more than 100%. In comparison with the graph 1.0 the sales keep increasing upward until the end of 2007. A decrease starts at the beginning of 2008 by almost 100 000 units. The fall was most probably caused by the financial crises in the

United States in 2008 and since the world economies are connected reduction of sales is

worldwide. As can be observed sales of hybrids and oil prices have a positive correlation in this case.

The prices of oil and sales of hybrids are connected; thus, it can be said that it is one of the major aspects to shape a marketing strategy for eco-friendly cars. Templin (2015) points out that almost every time there is a sudden increase in gas prices the hybrid sales rise.

However to claim this it is necessary to go into deeper into this investigation.

Chart 1.0

(Source: barchart.com, 2015)

Graph 1.0

(Source: U.S. Department of Energy)

Chart 1.1

(Source: barchart.com, 2015)

The current situation in the United States according to the U.S. Energy Department shows sales of hybrids from 1999 until 2014. The number of sales in 1999 was 17 HEV’s sold compared to the 2013 where the number increased to 547,097 vehicles. The last estimate decreased by roughly 7% to 507,272 vehicles but compared to the 1960% increase overall in previous years we see an increasing interest for eco-friendly vehicles. In the period between 2008 and 2009 the car industry suffered the most mainly due to less access to credit. According to the economic approximation the lack of credit could be responsible for more than an 80% decrease in sales in the Canadian and American markets (“The Effects of the 2007-2009”, 2012). This shows that ICEV and eco-friendly vehicles are probably not necessarily negatively correlated with gas prices.

Graph 1.1

Sales of Hybrid Vehicles in the United States 600000

500000

400000

300000 Units Units Sold 200000

100000

0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Years

(Source: U.S. Department of Transportation)

Figure 1.2 below provides unit sales numbers of HEV, PHEV’s and BEV’s. As can be observed there is a rise of interest in eco-friendly cars on the American market. The decrease on this graph in the years 2007 to 2011 represents the most economic crisis. Also we can observe increasing sales for BEV vehicles which corresponds with a Tesla increase in revenue.

Figure 1.2

(Source: U.S. Department of Transportation)

As could be seen on previous findings there are aspects which strongly influence the quantity of sales such as oil prices. However, besides oil prices and government impact there is also a different aspect according to some findings a societal shift towards eco- friendly cars. We see that the importance of variables regarding the socio-psychological

and environmentally based decisions for eco-friendly vehicles also affects sales (Nayum,

Klöckner&Mehmetoglu, 2014).

From the information received in this chapter it can be said that upon suggesting a new marketing strategy for eco-cars consideration should be afforded to the following aspects:

 The price of oil does play a role regarding the sales of eco-friendly cars.

 Marketing strategy will have lower efficiency upon a financial hurdle such as

economic crisis.

 Government actions do make an impact on buyer’s decision making.

2. Personal Factors

A. Environmental Factors

This unit will provide information regarding how a level of knowledge in terms of the environment together with socio-psychological terms shaping the final decision of a buyer and later suggesting a possible approach for marketing strategy.

Present automobile markets have many obstacles among which are ecological concerns, these customer concerns can change the auto industry image from the perspective of current or future buyers. Chen (2008) argues that for companies which invest into those environmental problems via new technologies can raise their competitive advantage and therefore create advantage over other competitors. Furthermore, in terms of the price of

products brandishing a badge of environmentally friendly can charge a higher price which improves of their distinction on market. In an investigation by Rahbar and Abdul Wahid

(2011) it was found that labels and brands with an eco-logo the relation with consumption behavior improves. The correlation between the ecological concerns and logos supported studies to conduct research regarding this topic. Many of them found out that people tend to buy things which have the ability to protect the environment and also because of this feature they will pay more for them (Kim&Damhorst, 1998).

Values inherently belong to the aspects which shape the final decision of the customer.

Kaiser (1999) claims that consumer’s ecological behavior is formed by subjective rules. His results advocate a high level of correlation among obligation to pro-ecological actions and personal values. This supports the findings that customers ecological values are highly dependent upon purchasing of eco-friendly vehicle (Henning &Karlsson, 2011).

We can connect this to environmental knowledge of customer where Henning and Karlsson

(2011) further mention that knowledge about the environment guides the element of ecological outlook. From this it can be said that environmental knowledge supports intent of customers to purchase eco-friendly products (Dekhili, S., &Achabou, M., 2014).

a) Hypothetical model

To summarize these theories and findings a hypothetical model (figure 1.4) conducted by

Yusof, Singh and Razak (2013) which can be seen below was found that values of customers are the most important variables shaping the awareness of environmental advertisement. Outcomes propose that values create a so called “mental appearance” which helps to create a strong effect to influence behavior of an individual. However, information about the eco-friendly subject does not play any significant role upon forming environmental justifications but instead better effects on the observation of eco-friendly products. The important finding of this hypothesis to make efficient marketing strategy is a fact that well educated customers in respect to the environment will not lead to insight of environmental awareness but essential to form the understanding of the eco-friendly product. Consequently, it is backing Kaiser (1999) who says: that environmental understanding plays a vital role in forming eco-friendly insight and approach.

This indicates eco-friendly advertisement could develop consumers’ knowledge for green vehicles; however, it probably will not persuade them upon their decision making.

Moreover an obligatory feeling appeared to be a major variable that has an impact on the appearance of the eco-friendly vehicles (Yusof, Singh &Razak, R., 2013).

Based on these outcomes a study recommended that the feeling of responsibility and values have strong impact in advertisement of eco-friendly automobiles. Upon making the marketing strategy it is important to take values into consideration which develop over a

certain time period. If the strategy aims for eco-friendly promoting the information, customer should be informed to guide them toward making a buying decision. Since eco- friendly understanding does not produce the connection of perceiving eco-friendly advertisements, marketing strategy should have a goal to increase consumers understanding to include harmful effects of ICEV’s on the environment.

B. Potential Socio-Psychological Forces

Psychology undoubtedly stimulates people’s final decisions towards any type of actions or product; this section will introduce psychological terms and theories to further suggest potential marketing strategy for eco-cars.

A. Basic concepts

In order to better understand the basic knowledge of terms following psychological terms three theoretical concepts which relate to so called psychological attitudes are discussed below.

a) Individual drivers

Ariely, Bracha and Meier, S. (2009) say that people tend to behave prosocially in order to appear in a society as accepted and they do it through various actions such as donations.

They further claim that “this level of prosocial behavior is striking in light of the economic

incentive to free-ride in the provision of public goods.” These motivation means have three basic extensive groups: “extrinsic, intrinsic, and image motivation”.

The intrinsic motivation is a stimulus driving the person from his/her individual view point in order to satisfy or fulfill his/her needs such as altruism. Whereas extrinsic motivation needs action to come from the outside influence instead of from one’s own feelings. The last term image motivation is individual inclination partially motivated by awareness of others. All of these three may have disconnected effects regarding the prosocial behavior but on the contrary in some cases they might interact. When an individual I seeking a social approval of their actions according to Ariely, Bracha and Meier (2009) “they should try to signal traits defined as “good” based on the community’s norms and values.” An individual who is altruistic can be observed as “good” compared to selfish or greedy thus being prosocial is considered to be perceived as good.

In the example provided by Ariely, Bracha and Meier (2009) Where they presented the following results: An individual who decides to buy an eco-friendly car could “add to one’s positive” image mainly in a society which values such vehicles. In another example by

Ariely, Bracha and Meier, S. (2009) it is supposed that government benefits the eco- friendly car by tax incentives in order to decrease the overall price and attract more buyers.

However, it will decrease the image worth of having the eco-car. Therefore, when an individual buys the car without having the tax advantage it demonstrates better knowledge about the environment (positive image) but tax incentives make the buyer care more for the

price. This relates to monetary incentives where the hypothesis found there is no effect in public contribution whereas in private the monetary incentives have positive contribution.(Ariely, D., Bracha, A., & Meier, S., 2009).

Another study conducted by Zeithalm (1988) regarding the extrinsic and intrinsic values the results of a study showed different results. The extrinsic values are chosen by a customer to a quality measurement without having enough information from the intrinsic values source. Such a situation happens upon three main points:

 Customer lacks the experience regarding the product.

 The assessment of intrinsic values is caused by not having enough time or interest.

 Evaluation of intrinsic values is important for future decisions.

In other words consumers cannot really know the ability of a product or service until they try it. Templin (2015) claims that in order to sell more vehicles it is significantly important

“by pulling out all the encompassing marketing campaigns that builds awareness to millions and millions of people and getting customers to drive the vehicle.”For example customer does not know how the chocolate tastes until he consumes it. In this case customer focuses on the extrinsic values. Thus, customer takes into consideration aspects such as brand name, warranty, packaging or reimbursement of intrinsic values for a product. The study also shows that single working people seem to spend less time reading the labels due to time constraints (Zeithalm, 1988).According to Smith and Broome (1966)

Price and quality already depends on the brand. Zeithalm (1988) mentions that in one study

found if people are not sure about whether the choice will be satisfactory they tend to pick more expensive product and of course price is based on marketing and branding.

b) Planned Behavior

The theory of planned behavior is used to predict someone’s intentional behavior that is to predict what people are planning to do. However the intention, is not always a term to predict what the person is going to do, it can be interfered by reflex or by change of conditions. The waste majority of peoples planned behavior (eating, playing games or reading) does not involve an involuntary response (sudden unpredicted reaction caused by inborn actions such as appearance of a spider when a person is scared of spiders) but intention is considered to be the best predictor. Intention is determined by attitudes, subjective norms, and perceived behavioral control which gives the final planned behavior as can be observed on the figure 1.5 below indicates how hard people try or how much effort they apply to execute the behavior with a high level of accuracy (Ajzen, 1991;

Aguilera, 2015). To understand this concept it we describe the main three components of this model: Attitudes toward behavior, Subjective norm and perceived behavioral control.

According to Ajzen (1991) “perceived behavioral control” along with the intention can straightforwardly forecast the behavior. Aguilera (2015) describes it similarly, that it is a perception to perform this particular behavior. The second term “subjective norm” is described as an influential implementation determining whether a person is influenced by their surroundings to whether they all contribute or for particular product or opinion

(Aguilera, 2015). In the case of a car purchase, whether is the person willing to buy an eco- friendly car and supported by others at the same time or not which at the end drives the final decision. The last term “attitude toward the behavior” means whether the future behavior is positively or negatively related to act (in case of vehicles, to buy a particular vehicle). In order to find precise connection between the action and the executer, determination has to be specific.

In relation to this theory there was conducted a study by Nayum, Klöckner, and

Mehmetoglu (2014) in order to determine what are the main incentives of people to buy eco-friendly cars or the ICEV by using a statistical approach. They distinguished cars among 6 groups where five were representing types of ICEV and one representing the EV.

Even though that Ajzen (1991) claims that the relations between these terms could be uncertain. However, the study showed that the EV comprises the highest level of correlation to “attitudes toward the behavior, Perceived behavioral control, and Intention”.

Moreover, buyers of EV’s had at some measurements diverse results against the others.

Hence those buyers of eco-friendly cars distinguish themselves from the rest by dissimilar psychological variables. (Nayum, Klöckner & Mehmetoglu, 2014)

Figure 1.5

Planned behavior model

(Source: Ajzen, 1991)

In a survey of 1202 randomly picked people was found in which attitudes and emotions are the most influential determinant of usage intention. People who use the electric car are less influenced by emotions in regards to the electric car and more by deep emotions in regards to car driving. The research also illustrated that people who are highly concerned about the environment have strong intention to use the electric car as soon as it becomes broadly available (Moons &Pelsmacker, 2012).

From the information received from chapter on “personal factors” it can be said that upon suggesting a new marketing strategy for eco-cars, take into consideration the following aspects:

 Financial benefit that people were looking outside of cost in order to justify the

purchase of eco-car.

 Looking for a stamp that shows that product as eco-friendly to positively project

their prestige.

 An educated person through media related to eco-products does not mean how they

care about the environment but it does change how they perceive the eco-product.

 The experience of the product is necessary thus; the marketing strategy has to have

ability to attract customers.

I. STRUCTURE OF CAR INTUDSTRY

A. Four Major pillars

The car industry is structured into groups and subgroups which create a sequential level

which has to be applied as a part of successful selling process. Those four nodes are:

 Manufacturer

 Importer

 Dealerships/Network

 Customers

The order of the selling process starts with the manufacturer which sells it to the importer,

then the importer sells it to the dealers who eventually sell the product to the customer

(Kelly, 2015). In the case of Tesla Motors who has been trying to change this established

process by having only company-owned galleries and stores. The cars sold for 2014 by

Tesla were few at 35,720 cars sold (this amount was calculated by adding purchasing price

of all model S types and divided by its total number and then this number was divided by

the total revenues). According to Kelly (2015) this should be the major change of marketing strategy for Tesla to change in order to have higher sales. This relates to the finding mentioned in the chapter “potential socio-psychological forces, individual drivers” that people need to first try the product in order to make a sale especially in car industry.

In the marketing book Kotler and Armstrong (2006) suggest that dealers, manufacturers and importers are the part of the sales promotion dealing with the goal of short term incentives later used to convince customers to buy. This also relates to the theory of channel management (part of supply chain theory) stating that participation of firms, producers and suppliers brings the goods and services to the customer (Kotler& Armstrong

2006). Moreover, marketing attractiveness according to Kotler and Armstrong (2006) is the power of suppliers. It determines the price volatility, change in quality and quantity of goods and services. For example the structure of the Lexus Czech Republic is designed as follows (Stadnik, 2015): The first step upon the delivery of a product is that the car manufacturer (Lexus) delivers the product to the importer for the European market called

Toyota Europe. In the second step the product carries on to another importer operating only in Hungary, Slovakia and Czech Republic. Lastly, the product arrives to the dealer in Czech

Republic. It is an organizationally demanding task but necessary for importation.

The process can be associated to an algebraic equation. Car manufacturer has to sell their products to importers (A), importers need dealers to carry the product (B) and lastly dealers need to sell the product to customers (C). The structural system of car industry where

among all them four parts are practiced marketing strategies with almost no difference

during the selling procedure (some of them will be mentioned later in the paper along with

the suggestions for possible marketing strategy).

II. STEPS FOR BUILDING MARKETIGN STATEGIES

A. Creating New Marketing Strategy for introduction of a new product

Before creating a new product it is important to establish how the product will be presented on the

market. This chapter will represent marketing strategies along with examples of their functionality

in the past.

1) Product planning process

To create or advance a new product the company has to go through various steps in

planning to eventually have success on the market depending upon the company’s goal.

There are four major points regarding the process of strategic planning which are as

follows: to find opportunities within the market, establish what the customer needs in the

product, desires of customer in the product and defining the product itself (Templin, 2015).

Lexus as any other brand is guided through these steps in order to become a distinctive

brand on the current market. Their goal is to attract the highest number of buyers (in case of

Lexus younger buyers) as possible. This corresponds to the theory of market segmentation

where buyers are sectioned by their particular behavior, appearances or needs. The point of

this is to find a distinguished segment where it can compete against other players on the

market along with formulation of a marketing mix and particular position (Kotler &

Armstrong 2006).

a) Market segmentation

As was mentioned in previous paragraph market segmentation is an important part of defining the plan for a product. Its content includes other variables such as demographics, cultural, behavior, and market targeting and segment attractiveness. According to research done by Mehta (2015) the segment of customers buying a vehicle is influenced by demographic, socio-cultural, psychological and economic factors. Therefore the marketing strategy has to take into account issues which vary by these groups.

i. Demographic, geographic, psychographic, economical, socio-cultural and behavioral

segmentation

Geographic segmentation creates a division of the market into geographical components such as nations, countries, provinces, towns or districts. Measurements took out of these components helps companies to determine in how many areas to operate with focus on geographical variances regarding requirements and desires of customers. Demographic segmentation divides the variables into terms which differentiate customers among themselves such as sex, sexual orientation, salary, education, faith, race or nationality.

However these variables change from time to time thus, to track this unstoppable process, life-cycle marketing strategy recognizes this procedure by products or various marketing methods.

Psychographic segmentation divides customers into sections based on lifestyle, personality, and social position. In terms of selling vehicles this grouping is significantly important. For example social inclusion affects inclination for cars, furniture or clothes. The last behavioral segmentation is believed by many marketing people to be the building point upon entering into a marketing segment. It deals with customer’s knowledge, attitudes or reaction to merchandise. Behavioral segmentation goes even further with its subdivision occasion segmentation which helps companies to determine markets by buyer’s actions it shapes usage of a product. For example Ford in 1940s responded desire of customers to have better looking cars which was implemented through “ornamental design features.”

The peak came in 1960 by introducing the Ford Mustang which becomes a symbol which

“almost everyone can afford.” Form that period Ford became the dominant car manufacturer in the United States (Haig, 2004).

Economic factors are mainly depending upon the level of income and overall wealth of the economy which can be stated according to the GDP which is generally considered as an index of monetary strength of a country or also as measurement of a country's standard of living. Mehta (2015) also mentions that a positive relationship between the decisions of a customer to buy a vehicle and his/her income level exists. According to another study done by Gupta (2013) found that “price-off amongst the promotional offers and fuel efficiency in the passenger cars are found to be the foremost reasons for the preference by the customers.”

Socio-cultural factors play a significant role in the decision making process. It consists of aspects related to family and friends influence by their opinions, attitude towards the brand, how innovative the brand is and knowledge shared among social groups. In a study conducted by Mehta (2015) the symbol of a brand conveys a loyalty by customers towards companies such as Mercedes or Toyota. In case of Mercedes its success was based upon innovation and prestige. For example in 2002 Mercedes released the “electro-hydraulic breaking system”, “electronic Stability Program” and “sensontronic” break control in new

E-class models which were high end models. In case of the Japanese automaker, Toyota it was stated as a “big-picture brand” as it became a pioneer by being first to introduce eco- friendly Toyota Prius in 1997 (Haig, 2004). It was also revealed that in contrary people are also driven by low priced companies such as Dacia or TATA (Mehta, 2015). Hence that people tend to see their personality mirrored in a brand which leads to reduction of risk during purchase related a factor for those who are having high level of uncertainty avoidance. Gupta (2013) found in his research similar founding’s. The results showed that friends, family and relatives strongly influence the decision when buying the vehicle.

ii. Market targeting

Market segmentation discloses aspects that business can utilize on the market and turn them into opportunities. The next step is to assess variables regarding the selection of marketing areas. The evaluation process includes two main scopes: segment attractiveness and company fit.

The first step is to collect date of present sales, growth, and prediction of profits in various areas. Out of these three aspects are “right size and growth” these variables leave the individual company in a position to decide. However, required growth and size are not sufficient for the company’s success. They have to take into consideration possible competitors. Another variable influencing the attractiveness of the market is power of suppliers. It determines the price volatility, change in quality and quantity of goods and services. This relates to the example of Tesla already mentioned in the text regarding the lower sales volume because of neglecting to have dealerships within their supply chain.

Lastly, attractiveness of the sector defines the power of suppliers. In other words, with a high density of competition and high power of suppliers; the market becomes less attractive.

b) Opportunities in the marketplace and possible marketing strategies

Before listing the situations and seeking for opportunities it is important to state what opportunities are. There are few clear explanations defining opportunities. For example, the definition by Casson (1998) says that the introduction of new goods, raw materials, services and structural methods which are later sold for a higher price compared to the production cost. Another definition by Timmons and Spinelli (n.d.) is that opportunities to be resilient, eye-catching and well-timed possible service or product that add value or build.

Therefore, entering a market place with a particular product leads to certain assessments which have to be done. Each marketing place differs by various aspects such as situations that deliver opportunities and reflecting in final results.

There are three main situations delivering opportunities (Monaghan, 2005):

1. Short supply – if the product is in short supply opportunities are visible on the market.

2. Innovative or superior way expresses the supply of current service or product. To

approach this situation we look to a few solutions. First, to receive feedback from

customers by regular questioning. However, sometimes this leads only to

improvement of product service and not a service or product. Second is the way

customers noted what the perfect version of the product is. Last customers are asked

to describe their process during purchase, use and liquidation to considered

opportunities for product or service. This approach was used by Mazda in 2015 for

developing the new generation of Mazda CX-9 2016 SUV model. Engineers during

the development of the engine followed the people around who would be potential

buyers of this car (“2016 Mazda”, 2015).Another example was the implementation of

Lexus customer service excellence dealing to give consumers the best experience

regarding customer cars which was researched on basis of inquiry of customer in the

luxury segment (Templin 2015).

3. Supply process of innovative products – when the innovation becomes the essential

part of the company, the focus is on improvement of a brand and product. Innovation

is one of the key marketing strategies in order to be successful on the marketplace. For

example Mercedes heavily advertised their new advanced A-class which was almost

completely different comparing to the previous generation, eventually it has had

phenomenal success across Europe. (Haig, 2004)

i. How to find opportunities

Opportunities within the market do not have to be clear initially, there are two possible

ways to find them (Monaghan, 2005). Reactively, shows the organizational structure of the

company where the ideas are selected only when they become visible. The developments or

discoveries can appear during development, suggestion from people within the company or

unexpected competitive action or current customers.

There are steps used by companies from various segments. In the car industry it is an

important step to have an overall successful marketing strategy. For example Lexus has

timed the release of its smaller SUV model in 2014 year and results even exceeded the

forecast. The orders for Europe were 10,000 vehicles during the first months of orders and

in Japan the sales were 9,700 vehicles whereas the expectations were 700 vehicles (10,000

Lexus, Lexus 2014).

ii. Demand management

Demand management is considered to be the part of marketing approach supposed to keep

existing number of customers and increase the number of new customers. Products and

markets determine the growth of opportunities. Ansoff (2010) determines this in four main

categories which can be seen in the figure 1.1 below.

Figure 1.1

(Source: ANSOFF MATRIX , 2010).

The market penetration increases sales with existing market with the existing product. The example would be the Mercedes case with the A-class mentioned earlier in this section or by Toyota with its successful marketing approach through advertising the renovated model

Corolla aimed to younger buyers (Haig, 2004). The second is market development where existing products are presented in new markets. This was a case of Volkswagen with its model Beetle; however, after WWII to 1959 Volkswagen was competing with imports. The

American advertising company Doyle Dayne Bernbach from the United States which helped by shaping the cars name and look to the current market and eventually became the bestselling imported car (Haig, 2004). The third is product development presenting modified products into existing market. This development stage happens in the car industry all the time. Car manufacturers present many new models every year. The last segment is the diversification focusing on implementing both market and product to be innovative.

iii. Marketing mix

It is commonly denoted to E. Jerome McCarthy’s marketing theory of 4Ps to develop

effective marketing strategy which includes: price, promotion, product and place.

Product is merchandise representing the outcome of a particular company towards a

certain market. During the development process it is advised to look at some aspects such

as packaging, design, features, quality or customer service and service after the buy.

Price refers to a number representing the final transaction value of particular product which

has to be paid in order to own the product. This is sometimes a problem for large

organizations to set up their prices on international basis. Most of the time the prices in

foreign market are higher compared to domestic market.

Promotion informs the customer within the target market about the features and attributes

of the product they will obtain upon the purchase. The promotion strategies either vary by

country to country or are the same globally. The choice of having one single promotion

strategy is questionable because cultural differences play significant role in final outcomes

and will not probably be successful. According to Kotler and Armstrong (2006) in the

theory of international advertising the negligence for differentiation causes hurtles which

they support by a European survey of 210 people out of which 57% percent believe that to

perform standardization is significantly problematic (p.176).

Place represents the way of channel through which products will be offered to customers.

For example the distances of dealerships to the customer have impact on final decision of

the buyer. Kelly (2015) claims that a customer can make final decision to purchase an eco-

friendly car however, if the placement of a dealer is too far the customer will eventually

buy either a different brand or chooses an alternative. In this case driver for customer

decision can be maintenance costs and customer service.

iv. Branding

Brand is represented as a symbol and as was shown in a previous example. It is a

significant contributor to the customer’s decision. Marketers defend the brand and try to

make it stand out with the definition for the brand. The high equity brand represents

features of high consumer loyalty, apparent quality and brand consciousness which can be

used to shape marketing strategy. It can define easily for the customer what they buy to

satisfy their needs which can be also expected in the future. For example the BMW is

defined as a “machine with ultimate driving experience.” BMW has stated throughout its

history keeping the focus on attribute of motoring performance and luxury at the same time.

Thanks to the definition and focus the BMW became a strong brand symbol in car industry

(Haig, 2004). In this sense the price is not really the main driver and customers are willing

to spend more for the vehicle. Kotler and Armstrong (2006) claim that customers tend to

pick mainly the brand even though the price of the competition is lower. Another example

is represents Ford with its car Edsel. “Consumers didn’t care whether it was revolutionary

or not. All they knew was that it looked ugly and had a name that sounded like weasel.

Furthermore, in an age when all the successful cars had tailfins, the Edsel was finless”

(Haig, 2003).

Upon the creation of a new product the brand name has to share the idea of the product itself and reflect the message to the customer so it is clear what he/she can expect. Focus should also be on the characteristics and symbols of the brand name because in other cultures it might have different meaning thus, it could lead to negative presence. There are four main factors to be considered:

 Attributes: first step to include to the market are product attributes.

 Benefits: compared to the attributes producers present the feature as practical and

emotional benefits. For example the word “durable” can be perceived by customer

as practical benefit, “I won’t have to buy a new car every few years”.

 Values: customer sees in brand values which are connected to the product such as

Mercedes buyers identify performance, reputation and safety.

 Personality: marketing people try to find out what kind of personality would the

brand be. Products reflect the customer personality thus the brand is attractive for

those that match brand properties.

The right brand name is undoubtedly one of the keys for the marketing strategy. For example the company Rover which is known for making SUV had problems in the past.

Their model Range 75 lunched in 1999 and received numerous awards and many positive feedbacks from various car journalists. People were reluctant to buy the car and sales were

even under the planned demand of the car manufacturer in the 1999. The main problem was

the brand. Jeremy Clarkson who is English announcer, journalist and writer specializing on

motoring (became famous mainly from the TV show called Top Gear) described it to have

a particular stigma involved in it. “It is just about the least cool badge in the business;

Rover, the name, is a dog “(Haig, 2003).

v. Buzz and word of mouth marketing

These two strategies correlate with each other to attract as much customers to the product.

However, it is important to explain each one in order to understand the concept.

First, the buzz marketing; the power of this strategy is to make people think that the

product, service or event is “cool” which seems to be an empowering tool to be able to

create “buzz” or constant discussion to make people try and buy the product. The buzz

marketing is in other words a practice to make people try the product and then let them go

away and talk with other people about their experience. The purpose is to make consumers

see how it is used publicly; they hear about it and create a trust relationship with the

product or a brand.

Second, the word of mouth marketing is considered to be one of the oldest and most

powerful strategies. It works basically by passing the information from individual to

individual by talking about the topic they are interested in. To make people do it they have

to have a connection to the brand thus, they feel passionate during the sharing process. This

strategy was used by Toyota upon selling its first generation of Prius in 1997 (“Toyota

Prius The Power”, 2012).

c) What the customer needs and wants in the product

In order to be successful or survive on the market it is important to not only focus on the

brand and opportunities companies have to also focus on the needs of the customer towards

the product. To win in current market environment the strategy of companies has to be

customer-centered. In other words the producer has to practice building relationships with

customers.

i. Customer value

The product is chosen by a customer upon circumstances fulfilling the maximum customer

delivered value, dissimilarity among total customer cost, total customer value and customer

satisfaction. The customer value represents all the time, monetary, energy and financial

costs regarding marketing offer and total customer value represents service, image and

personal value. The customer satisfaction relates to the expectations of a buyer and

customer can experience various scales of satisfaction. For example, Lexus upon

introducing its new generation of the Lexus GS sedan in 2012 aimed to a particular type of

buyer. The customer was defined as a married man around 40 to 50 years old with children

and a wife. He projects the image of confidence and success. He loves adventure and

explores new places accompanied with driving passion to keep improving towards the next

challenge and goal. Moreover his typical days are busy where he needs to stay connected

with his co-workers, his family and friends so he needs a comfortable ride with reasonable

space in his car but he also has a desire to experience some sportiness as well (“2013

Lexus” GS).

In other words the values of customer, characteristics of a product, utility, purpose and

simplicity were connected between the buyer and the product. The new model increased

sales by 1397% between 2011 and 2012 (“Toyota Motor Sales”, 2012). The GS is also

offered as a hybrid version to satisfy those who care more about the environment or want

higher mileage range. In the Czech Republic sales of GS hybrid reached around 80% out of

all sales for this model (Stadnik, 2015).

ii. Desires for eco-friendly car

The approach for the eco-friendly car slightly differs in regards to customers values. The

reasons they buy an eco-friendly vehicle tend to be more environmentally associated.

According to the Celest Migliore (National Marketing Manager for Advanced Technology

Fuels in Toyota) buyers of eco-friendly cars are more environmentally concerned and well

informed but they are not ecologists or “tree huggers.” They are more technologically

focused and aware that values are defined in terms of fuel economy and affordability

regarding the service and purchasing price of the vehicle (“Toyota Prius The Power”,

2012). Struggles related to the amount of sales might be as Templin (2015) claims,

confusion among many people about what the hybrid power train truly represents because

car manufacturers have different definitions of it. Therefore customers should be more educated in order to be willing to by a hybrid vehicle.

According to the research conducted by Caulfield, Farrell, and McMahon (n.d.) that the age difference determines peoples values for buying a car. In terms of fuel cost the group having age 17-25 resulted in the highest score. They also conducted the most important aspects for customers concerning car purchase which can be seen on table 1.0 below. The outcomes show that reliability, safety and price are the top three attributes to be taken into consideration by the marketers. Attributes such as brand name or alternative fuel ended up ranked lower. As was mentioned earlier in this paper, cultural differences might change the sequence.

Table 1.0

Source: Caulfield, B., Farrell, S., & McMahon, B. (n.d.)

d) Defining what that product is

To better understand product properties within the market environment figure 1.2 below

illustrates three main levels of product and its development from the core to the augmented

wrap.

Figure 1.2

Three main levels of product

(Source: Kotler, P., & Armstrong, G. (2006). Principles of marketing (11th ed.))

i. Individual product decisions

It is a key point to make right decisions linked to marketing and improvement of single

product are its attributes upon the defining of benefits it will offer. Considering the benefits

it has to be taken into account features, design, quality and style. For example Lexus has

always been considered to be a car for old buyers who seek a comfortable car. However, in

the last few years Lexus completely refreshed their lineup (with features mentioned earlier) and have been focusing more on younger buyers attracting them by implementation of a more aggressive style and sportiness (“Lexus International”, 2015).

The main duty of features is to differentiate products of a company against competition which is also the key reason for Lexus changing its appearance. Features of a product can be increased in its numbers to increase higher-level models. One of the most powerful and effective approaches is to introduce a new model with valued and needed features. The second quality of a product works as one of the main tools for placing. Valued attributes which make the product stand out of the others include resilience, consistency, easy operation and fix, accuracy, and other valuable characteristics. Total quality management

(TQM) is implemented by many companies to keep improving in each step of their operations. The third product design and style is an alternative way to bring extra value to the buyer. The design either makes the product stand out with valuable aspects important for customers. Design is a more complicated concept which cannot be interchanged for style. Style is measured only by appearance which works only to be distinctive in look but not in terms of performance. A nice style might be nice to look at but can be absolutely useless. Design has been a strong tool for many famous companies such as Apple, Rolex or Lexus cars who differentiate themselves from competition. These companies used design to be seen right away which helped them to attract new buyers or decrease costs.

e) Additional “ecological” marketing approach

Ecological talks and topics are more frequent and thus a term green advertising becomes more and more popular among firms to address the environmental connectivity to it.

(Özkoçak & Tuna, 2011). Green marketing is also described as a “reducing the long-term impact on the natural environment from the combination of inputs, outputs and consumer preferences” (Samarasinghe & Ahsan, n.d.). With this is connected the customer value which reflects what is important for an individual Zeithaml (1988) defines it as “judgment by the customer of the comparison between the benefits or utility obtained from a product or service and the perceived sacrifices or costs.” As is mentioned in the environmental factors, having a green label confidently persuades customer outlook towards the company

(Samarasinghe & Ahsan,, n.d.).A recent review of research done in 2014 by Nayum,

Klöckner, and Mehmetoglu say that purchase of cars on alternative fuels and drive trains show that the purchase decisions is mainly driven by price characteristics, performance and convenience attributes.

B. Successes and failures in automotive and eco-car industries

1. Why do new eco-friendly cars fail and what causes the success

If the economy would work well there would be no need from governments to cooperate with companies to support the development of eco-friendly cars. The price of fuels would be driven by the environmental costs with full transparency towards the customers along with the propulsion technologies.

But if failures in the market for road transport fuels and technologies do occur, as most would argue is the case, prices set in the market will not fully reflect the externalities caused by the use of fossil fuels and conventional engine vehicles; therefore will not send the right signals to economic agents.

There is a well-known saying especially in economic area that people do not always act rationally. The information externalities are described as not being transparent with the clear show of market needs which tends to lack within the market. For instance, interviews held in northern California showed that people act irrationally regarding saving financials for fuel. Especially, when it comes to purchasing a car people do not have basic information and knowledge. Another error they make is to count savings and estimation of fuel prices over time. However, it was found in Germany that people do act rationally in regards of their purchasing behavior but as a substitute they tend to increase their costs during the ownership. Buyers sometimes have risk aversion on a higher level because buying a car is most is generally the second highest expenditure in households. Moreover, the low number of eco-friendly vehicles entails that potential buyers prefer to wait until others try alternative fuel vehicles and they have doubts about the reliability of eco-friendly car (batteries fix) and running cost.

III. INITIAL INFORMATION FOR SHAPING THE POMOTING

CHANNEL

A. Advertising strategy

There are two major steps to settle strategy for advertising: to create message which will be

advertised, and select media for advertisement. In the past these two strategies used to be

set apart but it was causing friction. Currently, these two groups cooperate closely which

led to better outcomes.

Creation of the advertising message description is “no matter how large the budget an

advertising campaign succeeds only if commercials gain attention and communicate well.”

The changing message environment has been increasing especially in last decades. People

are surrounded by advertisement almost their whole day on TV, magazines, internet or

newspapers. Therefore, to keep the attention of a potential buyer has to be well planned

with innovative and entertaining content and get through the clutter of messages.

The first step to set up a message strategy to be effective is to select what will the essence

of the message. The goal is to make the targeted customer react towards the company or the

product. The response will be positive only if people believe they will get the benefit.

Therefore, creating effective messages starts with identification of customers beliefs.

Message strategy statements should be direct outlining benefits depending on what the

advertising should stress. The process must be impressive by bringing creative concepts on

the table. So the message is memorable and distinctive. The appeal of the advertisement should have three major features. Firstly, the message should be evocative to stress the driver which would force customers to decide for particular product. Secondly, the appearance has to look credible, however to reach this object is not easy because trust in advertisements is low. Study mentioned by Kotler and Armstrong (2006) claims that one third of respondents said that advertisements are unbelievable. Third, the appearance should be unique to express the dissimilarity against competition.

Message execution is next part of the advertising process where the “unique idea” is put into implementation. The effect of the message will be mainly influenced by how and what is said. Formation of the message related to tone, words, style and format has been found to implement the message. The message can appear in dissimilar implementation styles:

 Slice of life: product is typically used by one or more participants.

 Lifestyle: products are presented for particular lifestyle.

 Fantasy: fantasy is connected to a product.

 Mood or image: the style of product is linked to what people tend to picture or in

moods they usually feel.

 Musical: advertisement connects the product to the famous songs.

 Personality symbol: product is represented by particular personality.

 Technical expertise: company stress out its capability for their products.

 Scientific evidence: the product is scientifically proven to be better or safer than its

competition.

Tone has to be taken into consideration as well. Optimistic appearance can induce pleasure,

fun or enthusiasms which are counted to have better results compared to negative tones.

Moreover negative tones can induce fear which might dissuade people to look at the

advertisement. Finally, format can count for significant dissimilarity in the final effect. The

first thing a reader reacts on is the illustration thus, the power to attract attention has to be

strong. The next phase, headline with task to lure targeted audience to read it.

1. International advertising

Progress to put advertisement on the international scene requires looking at some

elementary aspects. The most important one is to find out what are the specific

characteristics which vary from country to country and implement them later on.

Standardization has been supported by some large promoters because it has benefits of

lower costs, better organization of international promoting efforts and entailed international

image. Nevertheless, there are also disadvantages mainly because it ignores cultural,

financial and demographic differences. The only positive outcome of standardized

advertising can work for consumer goods or business-to-business promotion.

IV. CASE STUDIES

A. Marketing success/failures

As was mentioned throughout this paper, there are many aspects which can lead either to

success or a failure. Car manufacturers has to take into consideration all of them in order to

have highest revenues possible at the end of each year. However, even the car industry does commit frauds from time to time (viz. Volkswagen scandal) which later require change in the marketing strategy.

1. Toyota failure

As almost any car manufacturer within the car market and even Toyota which is currently the number one seller of vehicles worldwide had technical issues changed the perception of a this brand into negative side for some consumers. The core of the Toyota scandal happened in 2009 with fuel paddle scandal consisting of jam of a fuel paddle leads to increasing of car speed. In such a critical situation drivers did not know how to react and as a result a number of them died because of this technical issue. Toyota responded with the explanation that carpet caused the jam of the fuel paddle. Nevertheless several customers claimed that they did not have carpets nearby their fuel paddle at all and investigation blamed the electronic system. The situation was severe for Toyota and its customers resulting in a recall of millions of cars. The brand disposition from customers towards

Toyota was decreasing mainly because of a fact that Toyota has marketed their brand as an innovative and technological company. After the 2009 crashes and 2010 recalls Toyota reassured customers about the safety by marketing campaigns and extended warranties.

Toyota changed its motto to “Moving Forward” in order to show people that they keep improving.

From this can be said that strong brand name of a particular company does not threatens its existence. Nevertheless the marketing strategies to show people the future approach to ensure the trust of the customers and to have possibility to obtain new ones.

2. Toyota/Lexus successful marketing campaign

Toyota became popular in the eco-market by its Toyota Prius (HEV) with overall sales based from 2000 through 2013 counting for 3,166,000 units sold on a global scale

(Worldwide Sales of Toyota, 2014). The process of building up this car on the market required technical and marketing approaches to be done. After the release of Prius in 2000 in the U.S. market, people found it underpowered and lack of practicality. Thus, the marketing campaign called “PRIUS/genius” was aimed not only on environmental advantages but also on features of practicality and attractiveness. Before the released Prius to the U.S. market, Toyota used series of dialogues which managed to attract around 40,000 buyers and through online dialogues with a result of 1,800 buyers (Halbright& Dunn,

2010). The further process of marketing strategy flowed into traditional forms through broadcast and print versions with combinations of outdoor, life style and interactive marketing. In practice was found that “eBrochures” worked well compared to the regular brochures where 46% of people who used it clicked through to Prius and eventually 36% demanded additional information. This was another sign of Toyota being an innovative brand by using online marketing almost fifteen years ago.

The process showed some surprising results. Those people who were really concerned about the environment did not show any strong interest towards the eco-friendly cars and appeared to be modest and uninterested about technological features. Nevertheless the first generation of Prius did not become trapped because of the marketing campaigns, features or price. The overall number sold of 30,000 cars was managed only because there were people either interested in innovations or were willing to take a risk (Halbright& Dunn, 2010).

Prius was at the stage of “the Chasm” (table 1.3) which means that the informative side of marketing was not informative enough for future buyers and had to be more advanced.

Table 1.3

Technology Adoption Lifecycle

(Source: Halbright, Dunn, 2010)

To expand marketing share and to win the customer is hard to do in fully captured market.

To increase share fast, reduction in price or sale advertising can have positive outcomes however, effectiveness might go down and vanish once the advertising is over. Increase of market share in long-term is done through investment into innovation, superiority or brand constructing. To invest into innovation was the case of Toyota. The take off in sales appeared with the second generation which improved power, fuel range, and larger overall size and responded to demanded features from customers such as increased cargo space or fold down seats. The marketing campaign focused on larger size, more powerful engine with the ability to be considered as an eco-friendly car at the same time. By that time competition from Honda was selling more hybrids thanks to the fact of having higher gas mileage. However, by the 2007 Toyota had an exclusive position within the eco-friendly market. The reason was that at that time driving an eco-friendly car was considered as being “cool” and its distinctive appearance. Half of reviewed Prius owners responded that it made an affirmation about them. In comparison this statement claimed only one-third of respondents. In other words they wanted other people know that they care about environment.

Significant change caused the shift from focusing on the initial customers and ecologist to financial advantages and mass market. The point of “the chasm” ended and shifted to another stage forward. A survey done by Toyota found that 73% of Prius buyers take actions in the same way as mass market customers and that Prius aims to people with higher financial sources (Klein, 2007). This relates to the marketing strategy of expanding the market meaning that if a company wants to expand it should look for new uses, users

and usage of its merchandises. New users can be found in already capture market share but they are not using it for particular reasons either uninformed or because of high price or that it lacks specific features. Another study conducted in 2008 showed that the price of the

HEV showed to be important aspect and only 11% of people paid more because of different interest. The next campaign in 2010 was aimed to convince buyers that Prius is “Harmony between Man, Nature and Machine” so there is no difference between eco-friendly car and what regular car can do. The survey done by Klein (2007) found that buyers felt about the

Prius to be less expensive compared to competition where 71% of them said that Prius having only one option of motorization was main part of the assessment procedure. In this case was used penetration pricing strategy to build market share which turned to be working for holding and gaining the market.

The understanding of Toyota Prius approach and history can be stated that inferior product cannot be a success only because of a fact that it is eco-friendly. To be an innovator in a particular field can cause some grip but sales will not be significant until the message is designed from a mass marketplace perspective. Prius also showed that by meeting the broad scale of customers’ needs along with strong brand name there is a possibility to become successful in numerous market places. According to Stadnik (2015) the sales representative in Lexus in Prague says that people buy hybrids because of reliability, low noise, low maintenance and prestige where in the Czech Republic the sales of models offering either petrol engine and hybrid power train.

3. Opel Ampera

As Toyota, Lexus, BMW or any other brand currently offers eco-friendly cars as being presented to be the future of traveling. Since the present market exhibits increasing sales for eco-friendly cars (as was showed in previous sections) thus, the number of eco-friendly cars offered keeps increasing. Opel entered this market with its PHEV called Ampera. It was the first trial from Opel to build an eco-friendly car. Opel Ampera was 3 years on the market because of its unfulfilled expectations. The sales were so low that the production had to be stopped at the turn of 2014 and 2015.

There were few reasons why Ampera was not profitable. First, Ampera entered the market in 2011 by being overpriced with starting price of$58,344 (Europe price) in comparison with the current Toyota Prius plug-in costs $44, 296. Even though that the price dropped to

$52 432 in 2013 the price is still high. Another issue was that Opel was not known as an innovative or particularly special brand as Lexus was. People did not interact enough with the car in comparison to the new generation of Toyota Prius. Toyota was the initiator of massive market production of eco-friendly cars but Ampera was only another vehicle in a lineup with no innovative features. Moreover, Ampera had lower practicality and by taking into consideration its price, there were cheap materials used in the interior. Opel did not use the full scope the marketing strategy of perceptual mapping which adds value to product placing by creating a map which establishes multidimensional views of what consumers perceive along with inclinations and insight to reveal psychological space between manufactured goods and division. Opel Ampera was not able to meet values for most of the customers. Last, PHEV has one drawback compared to the HEV which is the necessity to

charge the vehicle in order to have the electricity power. There was also low number of dealerships which were willing to have such cars in their auto salons decreasing the potential of Ampera even more.

From the Ampera case it can be said that brand name does play a role for a buyer decisions along with the pricing strategy and that in order to sell high number of vehicles it is important to practice mass marketing strategy. By not having a car in the dealerships limits the probability of people trying the car and thus lower quantity of sales.

4. Tesla and Lotus

Tesla is slowly becoming a brand name on the market and by some is considered as a real revolutionary company which is changing the way of how people travel and how they think about their car. The aim of Tesla is to change the perception of an electric car for people. A case study conducted by Pijpers (2014) on the topic “why we love Tesla and its model S” found three main reasons: it changes how people recognize the brand, styled design, and they show the future. EVs were before Tesla known as to not being too exciting or nicely designed. However, Tesla changed this perception and by making the car drive as a sports car with look designed by Lotus suddenly changed perception of some people this made the car “cool”. This is utilization of buzz marketing where the car was said to be based on

Lotus design and characteristics for driving. The way Tesla eco-friendly cars work along with their marketing strategies and by releasing their patent makes the Tesla brand a game changer which makes it even “cooler”.

B. Challenges for shaping the marketing strategy

1. Prioritizing the resources and its results

The style of deploying resources of a particular brand is the biggest challenge because it is almost impossible to do all at once, thus the approach has to be strategic (Templin, 2015).

As almost all car manufacturers in the world have to adjust their current inventory for short-term and long-term strategic plans in order to be successful and make their marketing strategy work with it. The execution of the plan varies from manufacturer to manufacturer in time periods. In case of Lexus the main two steps were in two years first to change the brand identity (spindle grill, front of every car) in the lineup. The second was to bring the emotion to the brand (develop sports cars and supercars). Chrysler takes the same marketing strategy in terms of emotion and distinction. Their vehicles represent in customer’s minds words such as “graceful, elegant or dreamlike”. Chrysler has been building unconventional vehicles which have ability to stand out from the crowd (Haig,

2004) The Lexus changed and the spindle grill is to immediately distinguish Lexus vehicle on the road for which was Lexus criticized in the past.

V. SUGGESTION OF MARKETING STRATEGIES

A. Marketing drives the price

Based on the findings in this paper it has to be said that price and brand name are important

aspects for shaping the marketing strategy within the eco-friendly market. Therefore the

suggestion is to use some of the pricing strategies which will be presented further in this

section. However, it has to be also said that there are differences in marketing strategies

between the old manufacturer and new manufacturer.

1. Skimming pricing

The purpose of this strategy is to set the initial price at the beginning and then slowly keep

decreasing the price as the product will become more available on the market. This strategy

is used by Tesla since it is considered to be a new car manufacturer with innovative

product. Such a strategy is also suggested to old car manufacturers nevertheless will not be

needed because they mostly captured their targeted market and not be exposed to risks in

future.

2. Bundle pricing

Products are bundled together and create single price. This could be explored in the future

marketing strategies. For example, Tesla could use it because they have other products to

offer.

3. Value pricing

As was described throughout this paper to meet value of a customer is one of the essentials.

By using this strategy the producer is setting up the price based on reimbursement for the targeted buyer. This is usable for either old or new seller on the market. It would be more effective for old ones since they could use it as an option from being stuck in the same market.

4. Competition pricing

The strategy here is to set price according to the competition with three different possibilities; set lower, the same or higher price. In term of utilization it can be used either old or new seller however new ones have an advantage to be more flexible such as Tesla.

5. Premium pricing

The price is increased in order to reflect the value of a car. This strategy has been used by

Tesla or Lexus (luxury brand of Toyota). However these two car manufacturers are innovative and new on the market and thus much easier for them to set up the price high compared to the old brands where they already established their brand and perception towards customers.

6. Optional pricing

The product is offered with extra options to increase the revenue. This approach is mainly aimed for eco-friendly cars with a target to sell in lower class.

7. Penetration pricing

Strategically shaped process to keep the price low in order to gain market share and as soon as the market is captured the price will increase. This strategy is usable for either old or new producers with low cost, high capital who want to change their perception. This could be a suitable approach of Volkswagen as to change their brand perception.

As was found at the section of “circumstances effecting marketing strategies” that oil and government actions have effect on the sales of eco-cars thus, the pricing strategy should be addressing the progress of these two aspects. Hence that the price of the eco-friendly car can vary which can be utilized for attracting targeted groups of customers.

B. Channel and Message

1. Customer education

It was found during the research that targets are more educated and are characterized by attributes that vary from regular buyers of ICEV. Thus, to increase the sales revenue of eco-friendly cars is to promote the abilities of eco-friendly vehicles through proper promotion channels with proper informative contend.

The first step is to set up who will be the campaigner. According to findings in this paper it should be those who work within the particular company in research and development department for reason to be more convincing upon the promotion. The second step is to make the decision when. It should be an ongoing process where the marketing strategy is set up first in order to attract customers and inform them what the product with its brand name represent and will do in the future from customer perspective such as Tesla or Lexus.

Moreover, it keeps the company honest towards the customer’s perception. The third point is how to perform it. The channel has to able to address targeted group of customers. The proper channels could be peer reviewed journals, public interactive forums, TED talks and reality TV shows (if VW would run its own reality TV shows it could change the perception of its brand name more easily).

The principle can be also effective by using well-known people but it has to be used properly; they have to be interested either to environmental topics or innovative and technological aspects in order to make the advertisement believable. The wrong choice of using a famous character that is not interested or related to the advertising campaign loses its functionality and decreases the probability of success. A famous person picked for the promotion might appear “cool” for some people because well-known people drive the trends and at the same time increase the level of attractiveness of a car. This promoting suggestion for eco-friendly vehicles should marry an educational message with the fame factor in order to educate and inform targeted customers. Nevertheless, it has to be taken to consideration that form of the advertising has to vary by country or continent because of various regulations in legal systems for instance the law about broadcast advertisement in

the UK has to be compliant. The extent of the advertising about the product should be well comprehended relating to the whole lifecycle of the product and add the additional information if necessary. The advertising should also avoid any “excessively categorical phrases” in the promotion (Tefelska, 2009). Tefelska (2009) further adds that there fundamental principles to be used such as sincerity, honesty, clarity well-balanced language and liability of communication.

Many people reads the regular media sources and thus, auto manufacturers should invite these journalists to also address the real properties and functionality of particular eco- friendly car in order to dispel any confusion they might have.

C. Power of emotions

1. Buzz and word of mouth marketing

According to the findings in this paper it is an essential aspect to make people come to try out the vehicle and then disseminate their experiences throughout their channels within their social environment which will heavily influence their decision process. This strategy contradicts with regular radio or television advertisements is rather usage of mass marketing on principle of distribution of a message as broadly as possible and creates a

“halo” effect among people. “Buzzing” which can be also substituted by a term “micro- marketing” supposing that personal way of marketing the product can be more effective in reaching potential customers in comparison to the regular broadcast campaigns and makes them more excited about the product.

Another possible utilization of this strategy can be used through buzz agents who will work as a walking promoting tool. The most effective buzz agent would be those with long contracts list. Their main task would be to make the eco-friendly car look “cool” and at the same time analyzing peoples values which could be connected to the properties of the vehicle.

The aspect of making something “cool” enough for customers’ needs to be addressed the values of a targeted market. The another effective way would be the accentuation of a product form a brand which used extraordinary features such as materials, way of creation and making the product, design, cooperation with another well-known prestige company or the power and ability of a technology.

Nevertheless, this approach has to be use wisely. In other words the usage should not be overwhelming so people do not become skeptical or annoyed which would have opposite results in the long term.

D. Additional proposal

The present market is overcrowded by marketing outcomes and the main task of the suggested marketing strategy is to attract the buyer to look at the product and become interested into try it out. The correct usage of channels is aimed to address as many people as possible in order to create a “chain” between people that know each other. The most

efficient advertising campaign is between family and friends. As in case for Tesla it is question of prestige which relates to the Mercedes way of success. The channels suggested should target the particular group of customers and capture their values. After setting up the targeted group for the channel the advertisement should be concentrated on the specific attributes of a car in order to disperse the uncertainty about the vehicle. In case of eco- friendly vehicles it should be its quietness, low maintenance, prestige and practicality.

People tend to like the fact that they have a better and more valuable product than their surroundings or neighbors. The marketing strategies which will be presented should include the car itself otherwise it might work against the seller. The marketing strategy should be used before the release of the product in order to create emotional connection with the buyer and brand within the market. The channel should also clearly state what kind of eco- friendly vehicle is promoted so people are not confused about its functionality and safety features.

VI. CONCLUSION

People do differ in values they consider to be important for the vehicle which applies to the

fact that each market has its dissimilarities too. In order to create marketing strategy with

positive outcomes it should include drivers to convince the potential buyer enough during

the decision making process to purchase the car based upon local conditions. However, the

general suggestions are that customers have to be educated to properly understand the

technology of the car. The message has to be presented in a way to arouse the excitement of

the buyer and create the feeling that to have eco-friendly car is “cool” and prestigious. It

will also message to the people that by purchasing such a car the buyer will be seen as an

educated person as well. However, to convince the customer proper strategies have to be

used. According to the analysis above are recommended to use pricing strategy, strategy to

make the customer excited about the product and to have a proper channel tool to educate

and convince buyers about functionality of eco-friendly car. Nevertheless, these steps need

to be properly utilized depending upon local conditions to not be excessively presented in

order to not repel demanded clientele in presently strong competitive environment.

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APPENDIX

This table will assign each type of car a rating based on its attractiveness as an

environmental product. The five types of vehicles in question are rated by the

environmental impact made by several different aspects of the product. The points are

based upon negative (red), medium (orange) and positive (green) properties of car to be

used for the marketing strategy. The highest the number is then the car is more easily

promoted.

HEV EV PHEV FCEV ICEV Oil Change ✓ ✓ ✓ Exhaust Check ✓ ✓ ✓ Need to Recharge ✓ ✓ Gas, diesel, gas, diesel, Gas, diesel, Power source electricity hydrogen CNG, electricity electricity biodiesel, Using ICE ✓ ✓ ✓ 3,5 – 8 hrs (slow) 5min + EV Charging time 5 min 5 min 5 min 20-30 min numbers (fast) Comparable Comparable Possible to Range is high range as with range charge at , takes few Low price, Benefits ICEV, can use with ICEV or home, no minutes to easy to refuel current fuel better emissions refuel network Low range, Slightly long recharge Almost now Still uses the Low range, obsolete time, low refueling Hurdles ICE, low ICE still major technology, number of stations (80 in range of EE power source hard to find electric Europe), improvements stations 75-90 miles, Annual Range using 26 miles Tesla 208 - 26 miles N/A - EE only (circa) 265 miles 75 - 90 miles, 264 – 1491 Range (circa) 559 miles Tesla 208 - 559 miles N/A miles 265 miles

Emissions Emissions reduced by the More efficient reduced by the More efficient High Environment electric motor than ICEV, no electric motor than ICEV, no emissions but ICE still emissions but ICE still emissions major source major source Total 7 10 5 10 4

*ICE – internal combustion engine

*EE – eco-engine

Red – 0 points

Orange – 1 point

Green – 2 points

Source: Electric vehicles in Europe (2014)